From stuff
NZRU breaks $100m mark
19 March 2006By GREG FORD
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]New Zealand rugby's previous revenue record is about to be obliterated.[/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]The sport raked in total revenue of $104 million in 2005, breaking the $100m mark for the first time. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]New Zealand Rugby Union earnings from last year's wildly-successful Lions tour and smart investment in foreign exchange hedging means turnover is tipped to reach $130m. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]Associated expenditure will offset some of the spike, but the union should easily surpass 2004's $20m profit. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]Champagne flowed after that result, as did a record disbursement to the game's shareholder provinces. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]About $8m was divvied out to spend on the grassroots of the game. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]But the NZRU, which would not comment on the figures, is unlikely to be as generous this time around. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]The figures, to be confirmed amid fanfare at its annual meeting in April, will precede a sobering profit warning. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]Earnings are forecast to dive by as much as $50m for the 2006 reporting year. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]A cash crisis has been averted thanks to some smart financial planning. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]The union announced last year it had $57m stashed away in reserve and its coffers should bulge by as much as $85m on the back of its latest revenue record. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]But the nest egg will insulate it for only so long against some undeniably concerning trends for the union. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]The union's successful foreign exchange contracts expired at the end of 2005. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]Put in place in 2001, five years after the original Sanzar $US555m 10-year deal with News Ltd was signed, the hedging deal has reaped the lion's share of the reserves - $27m in 2004 and about $35m last year. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]The masterstroke of FX hedging created the opportunity for the NZRU more money than the Australian Rugby Union banked off the back of hosting the 2003 World Cup. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]But broadcasting revenue will drop in 2006 because of the new five-year $323m News Limited deal being less money than in the past. Sponsorship and gate revenue will also drop because the domestic test programme does not match the attraction of the Lions tour. This, coupled with zero hedging income, is a triple whammy, yet not an unexpected hit to the union's bottom line. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]"Complacency in respect of the financial results is not appropriate," NZRU chief executive Chris Moller said when announcing last year's $20m profit. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]"The majority of the 2004 revenue was received in US dollars, for broadcasting rights sold to News Limited and in sponsorship revenue from adidas. Had the majority of this revenue not been hedged and been converted into New Zealand dollars at the year-end exchange rate then the NZRU would have recorded a loss for the year of $6.5 million, $27 million below the actual result of $20.5 million." [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]Moller said at the beginning of this year one of the union's key strategies would be to find new revenue streams to address the pending fall. But it's unclear what plans he has up his sleeve. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]Moller would not discuss them with the Sunday Star-Times this week. Cutting fat from the rugby bureaucracy could be one answer. Tax-free interest from its reserves will also boost revenue. But at the moment, without hedging income, it's living several million dollars above its means. An operating loss of $10m next year is on the cards. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]Weathering the hangover following the multi-million hedging gains is the type of headache most sports would kill for. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]Rugby's revenue has long been the envy of rival sporting bodies. Even though the sporting cash cow has long dwarfed them, its rivals now have millions more reasons for envy in lieu of its recent spike in earnings. [/FONT]
[FONT=Verdana, Arial, Helvetica, MS Sans Serif]The combined total earnings of premier Kiwi sports like cricket, league, netball, soccer, basketball, golf and tennis were $46.7 million in 2004, not even half of rugby's[/FONT]
